All about Initial Public Offering – IPO

Now that a few basics of MF has been done..now we could move on to other terms in the finance world…

So what is IPO??

This is a question running in most of the minds…especially who is novice to this finance world.

Basically it means that a private company (private ownership) is now going to be a public company (public ownership). A private company would need capital in line for its plans for expansion. The additional capital can be procured via issuing shares to public. Internally a lot of study is done as in when to come out with an IPO, what price, what no. of shares etc..

The issue is open for small investors, Financial Institutions, NRIs etc. Depending on the popularity and the funds received in the issue, the allotment is decided in a pre decided ratio. Not necessary that would be allotted full quantity you apply for. The balance funds get credited back to the investors account as soon as the allotment is decided. The issue opens for 3-5 days (approx) and gets listed on exchanges within 20 working days (approx) of the issue closure. Forms are easily available with borkers / banks etc..  

There are some precautions an investor should look at before applying for any new IPO issue:

-          Who are the promoters and what has been their track record?

-          Company track record.

-          What new projects would it come up with after receiving funds from the issue?

-          Global Risk factors

-          Project cost and its profit projections

After the listing of the stock on the exchanges, it is open for everyone to trade in. Investors who would have applied in the IPO would have got their shares and can even sell off if they please to.  

What I have tried here is to just mention about the basics of IPO.. though it covers much more..which I would take up in next few posts..

“ The most predictable thing about the stock market is the number of experts who take credit for predicting it.” -Dave Weinbaum